The occurrence of osteoarthritis is closely related to progressive and irreversible destruction of the articular cartilage, which increases the friction significantly and causes further inflammation of the joint. Thus, a scaffold for articular cartilage defects should be developed via lubrication restoration and drug intervention. In this study, we successfully synthesized gelatin-based composite hydrogels, namely GelMA-PAM-PMPC, with the properties of biomimetic lubrication and sustained drug release by photopolymerization of methacrylic anhydride modified gelatin (GelMA), acrylamide (AM), and 2-methacryloyloxyethyl phosphorylcholine (MPC). Tribological test showed that the composite hydrogels remarkably enhanced lubrication due to the hydration lubrication mechanism, where a tenacious hydration shell was formed around the zwitterionic phosphocholine headgroups. In addition, drug release test indicated that the composite hydrogels efficiently encapsulated an anti-inflammatory drug (diclofenac sodium) and achieved sustained release. Furthermore, the in vitro test revealed that the composite hydrogels were biocompatible, and the mRNA expression of both anabolic and catabolic genes of the articular cartilage was suitably regulated. This indicated that the composite hydrogels could effectively protect chondrocytes from inflammatory cytokine-induced degeneration. In summary, the composite hydrogels that provide biomimetic hydration lubrication and sustained local drug release represent a promising scaffold for cartilage defects in the treatment of osteoarthritis.